VAT return mismatch additions set aside where corrected audit report and reconciliation evidence were not verified

Additions based solely on mismatch between VAT returns and the books of account could not be sustained without verifying the corrected VAT audit report and reconciliation evidence. The assessee's case was that the discrepancy resulted from an inadvertent error in the original VAT filings and that the corrected audit report aligned the VAT figures with the audited financial statements, return of income and Form 26AS. Because the lower authorities had not examined that corrected report, the factual controversy remained unresolved. The ITAT therefore set aside the additions and remanded the matter to the Assessing Officer for de novo adjudication after proper verification of the reconciliation and supporting documents.

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Issues: Whether additions made on the basis of mismatch between VAT returns and the books of account could be sustained without proper verification of the corrected VAT audit report and reconciliation of sales and purchases.

Analysis: The additions arose from discrepancies between the turnover and purchase figures in the VAT returns and those reflected in the books and return of income. The assessee maintained that the mismatch was due to an inadvertent error in the original VAT filings and that the Annual VAT Audit Report, subsequently filed in corrected form, reconciled the figures with the audited financial statements, return of income and Form 26AS. The corrected VAT audit report was not examined by the lower authorities, and the record showed that the core factual controversy turned on whether the discrepancy was genuine or merely a rectifiable filing error. In such circumstances, an addition based only on mismatch, without a proper verification of the reconciliation and supporting documents, could not be sustained as final.

Conclusion: The matter required fresh examination by the Assessing Officer, and the impugned additions were set aside for de novo adjudication after verification of the corrected VAT audit report and connected evidence.

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